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In theory, I don't see a problem with this type of share structure and don't believe an investor would lose anything by buying this stock at an appropriate pric
by rsj_hn 8y ago
In theory, I don't see a problem with this type of share structure and don't believe an investor would lose anything by buying this stock at an appropriate price. Shares with fewer rights will sell at a discount to shares with more rights.
In practice however, there are good reasons why the exchanges and others want to discourage these types of corporate structures. It is difficult to price the risk of a CEO going off the reservation, so to speak, and investors will be unable to pressure the CEO or replace the board in case the CEO ends up not being a good steward of investor funds. There are always principle agent problems, and having the CEO on a longer leash means that pricing the stock becomes a lot harder, and you will end up with a lot of mispriced assets, certainly ex-post and probably ex-ante. This is true even if the average of all such assets is properly priced. That is a welfare destroying thing. E.g if the universe contains two stocks that should each be priced at $1, and one is priced at $2 and the other at 50 cents, then this is welfare destroying. So anything that adds opacity to long run returns is bad for the market -- you can't just say that investors will properly discount the opacity. This is why we have disclosure regulations rather than letting firms not disclose financial information and letting the market price that.
IMP it would be much better for Musk or someone else to create a charity with the goal of going to Mars and endow it with ownership of stock of for profit firms like SpaceX. This is cleaner than having a for profit firm adopt a pseudo charitable role.
You also have to think of what will happen to these super voting shares after the CEO/founders are gone. Will their kids share the same vision and foresight? Having these types of structures creates a lot of practical problems even though in a simple theoretical model there is nothing wrong with doing it.